Impact of Human Resource on the efficiency of Microfinance Institutions: An empirical investigation.

Abstract

This study investigated how human resource (HR) contributes towards the efficiency of microfinance institutions (MFIs). Cost per borrower has been used as a proxy of efficiency. Human resource is one of the nine knowledge areas in Project Management on which this study focused on. To alleviate poverty, Microfinance Institutions (MFIs) deal with every new intervention as a project and therefore, project management is helpful in a sense that it contributes to the efficiency of microfinance. As, for the survival, MFIs have taken a turn towards sustainability and commercialization. The quality of service delivery in the microfinance industry depends on person to person contact and relationship. Due to various challenging circumstances in business, MFIs competitive position keeps on changing constantly. Hence, it has become more human resource-intensive where sourcing of skilled and quality human resources can play a crucial role in sustaining the growth of this industry. Using a panel data set of around 491 MFIs, this study investigated the impact of HR variables i.e. personnel allocation ratio, personnel expenses and staff productivity on the efficiency of microfinance by controlling external and internal factors. By employing random effect model our findings suggest that staff productivity and personnel allocation ratio improves the efficiency of an MFI, whereas, personnel expenses have a positive significant relation with cost per borrower.